I missed out on $12 million.
It’s the brutal, honest truth—I missed out on the chance for $12 million.
But the thing is, I’ve made equivalent amounts in a shorter time, and you can too.
It’s the 1990s, and things are changing. The internet is new. Mobile phones are coming online. There seems to be a fancy new computer chip, software, or technology to do pretty much everything.
It’s an exhilarating time to be young, to be on Wall Street, and to be contemplating investing.
I am sitting at my trading desk, doing what many young people do—I’m thinking of ways to become rich.
Or to get richer quicker.
My desk sat amongst a bunch of quants—‘quants’ being the nickname given on Wall Street for the mathematically inclined or people hired for being mathematically-minded. The reason my desk sat there was because I, too, was a quant. I was employed for my mathematical skills.
I had recently told my fellow quants that I was looking for a new investment.
I was looking for the new, new thing, something that was going to overtake the world. A company where I could place my dollars down today, forget about that investment for 20-30 years and tune back in to find it worth millions.
I was doing my own research, of course, but extra data input, especially for a quant, is always a good thing.
Upon hearing my call for investment help, one of my good friends, Mark, tapped me on the shoulder one day and asked for a quiet word with me.
You know, the type of hushed conversation where you know you are being let in on an exciting secret. An inside story that no one else was privy to.
The guy was, in addition to being a super lovely bloke, extremely bright. Scary bright. I trusted him.
This was the great thing about working with quants; they are damn smart people—intelligent people that do their homework.
I know when any one of them were to make a recommendation, it was not just on a whim or a good feeling. It would be off the back of thousands of hours of work, reading, and research. These guys knew their stuff.
So, we find an empty corner office, and Mark shuts the door.
I ask Mark, “yes?”
“Well,” he starts, “I heard you are looking at new companies, new investments.”
“You heard right,” I say.
My god, it felt like I was looking to buy drugs.
And by now, I must admit, my heart was beating fast. Perhaps it was the change in season, the lovely weather, or just the mystery of the quiet conversation in the corner office. I mean, what was he going to tell me?
Had somebody come up with the cure for cancer, and I can invest early? Is that what he’s about to tell me? This was big.
Now, Mark has many positive traits but getting to the point was not one of them.
As it turns out, being patient is not mine either.
Finally, after my attempts to politely (through gritted teeth) tell Mark to spit it out, he finally spills:
“Well, actually, there is a company that is about to IPO next month that I think is going to do amazing things. It’s started by this really awesome ex-Wall Street guy that used to work at Bankers Trust, which is where I got the connection.”
You hear this a lot in investing.
People want to know who is leading the operation. It makes all the difference in the success of nearly everything. It is imperative, and usually, the first thing mentioned when something up.
Of course, there’s one thing more important: the product or service—what the company does.
I dismissed the ‘awesome leader’ with a sufficient level of disdain. It wasn’t that I thought the credentials were bad; they weren’t. It’s just that I wanted to get to the main course.
“So, what do they do, Mark?”
Mark looks around the empty office, just checking that we hadn’t accidentally missed someone sitting in the room with us, and he says…
“They sell books.”
I look at him, dumbfounded. “Books?!”
“Yeah, books. They are selling them online, the company is called ‘Amazon’, and we have enough time, we can buy into the IPO.”
“Fucking books, Mark?” They’re selling books…this is the big secret?
Before you start thinking that I am a rude and mean person, this is how we spoke to each other on the trading floor. All day, every day. It was, for want of a better expression, very direct.
As I said, I was hoping for the cure for cancer, and I got online books.
All I could think was, as we always do when we think about buying (or not buying) a company, would I use their product?
And the answer was no. At least, I thought I wouldn’t.
Why would I buy online, I thought to myself when I could get a book from about a million books stores within a stone’s throw of the office?
Amazon. Books. What a joke!
And of course, the joke, as you will know, was on me.
If I had invested $10,000 that day, it would now be worth about $12 million. Amazon has gone up 120,000%.
I look back at this conversation often. I find it very hard to think if I would have ever acted any different. Given the information I had, I still think I made the right decision.
Even though, statistically, I clearly didn’t.
There are two things that I want you to think about when it comes to my experience.
These two things are crucial when it comes to making life-changing returns on the stock market.
- This trade took nearly 25 years to play out. 25 years!
However, if I had invested 10 years after this conversation, I still would have made roughly the same amount of money.
Great companies, in other words, let themselves be known for years, sometimes decades, before their most considerable performance returns.
- It doesn’t HAVE to take decades to get excellent returns.
The problem with the Amazon trade is that it took nearly 25 years to reach these, admittedly staggeringly good, returns.
A long time.
Do you think Wall Street would stand around for 25 years to wait for that kind of wealth?
Not in my experience.
So, is there an alternative for great returns but in a very short period?
There is, and they are a financial instrument called derivatives.
Derivatives can make the type of returns that would make Bitcoin blush.
What’s more, they are available all the time and nearly everywhere.
The good news is I am an expert at derivatives—one of the best (just ask my clients). And if you are interested in these products, keep an eye out for my next posts, where I talk about them a bit more.
This information has been provided as general advice. We have not considered your financial circumstances, needs or objectives. You should consider the appropriateness of the advice. You should obtain and consider the relevant Product Disclosure Statement (PDS) and seek the assistance of an authorised financial adviser before making any decision regarding any products or strategies mentioned in this communication.
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Who is Paul Atherton, That Wall Street Guy?
An ex-Wall Street advisor who worked with major players in the global financial industry for over 30 years, Paul’s mission is to help regular people reclaim their wealth and financial security.
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